- Biennial reports
- Total public financial support reported by Annex II Parties in their BRs submitted (as at November 2021) amounted to USD 48.8 billion in 2017 and USD 55.3 billion in 2018. The annual average (USD 52.1 billion) represents an increase of 5.7 per cent from the annual average reported for 2015–2016. Climate-specific financial support, which accounts for up to three quarters of the financial support reported in the BRs, increased by 8 per cent to an annual average of USD 37.8 billion. Climate-specific financial support was reported through bilateral, regional and other channels, with USD 29.5 billion in 2017 and USD 33.3 billion in 2018.
- Mitigation finance constitutes the largest share of climate-specific financial support through bilateral channels at 66 per cent. However, the share of adaptation finance increased from 15 per cent in 2015–2016 to 20 per cent in 2017–2018, as it grew at a higher rate than mitigation finance.
Figure 8
Climate-specific finance and core general funding provided by Parties included in Annex II to the Convention to developing countries, 2011–2018, as reported in their biennial reports
(Billions of USD)
Source: Annex II Party BRs.
Note: Data as of November 2021. “Core general” is support provided to multilateral and bilateral institutions that Parties do not identify as climate-specific. In its BR4, the EU reported climate- specific finance related to the European Investment Bank under multilateral channels and in its BR1– 3 under bilateral, regional and other channels.
- Multilateral climate funds
- The fourth BA reports that UNFCCC funds and multilateral climate funds approved USD 2.2 billion and USD 3.1 billion for climate finance projects in 2017 and 2018,
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respectively. The annual average for 2017–2018 (USD 2.7 billion) represents an increase of approximately 39 per cent compared with those in 2015–2016, owing primarily to increases in project approvals by the GCF Board and the GEF Council.
- In terms of inflows to the operating entities of the Financial Mechanism, the seventh replenishment of the GEF resulted in USD 4.1 billion in pledges and USD 802 million allocated to the climate change focal area, compared with USD 4.4 billion in total pledges and USD 1.26 billion allocated to the climate change focal area in the sixth replenishment. The GEF noted the climate co-benefits to other focal areas, including biodiversity and land degradation, with a goal to provide for cross-focal area climate-related finance of at least 60 per cent of total GEF funding commitments over the four-year period. The first replenishment of the GCF Pledging Conference in 2019 amounted to USD 9.8 billion, compared with USD 10.2 billion from the Initial Resource Mobilization Pledging Conference in 2014.
- Multilateral development banks
- The fourth BA reports that MDBs provided USD 34 billion and USD 42 billion in climate finance from their own resources to developing and emerging economies in 2017 and 2018, respectively. The annual average (USD 36.6 billion) across these two years represents a 50 per cent increase since 2015–2016. A variety of approaches may be used to estimate the attribution of climate finance of MDBs to developed countries, with some resulting in a 76 per cent aggregate share and others up to a 90 per cent aggregate share (OECD, 2019a). The attribution of these flows to developed countries is calculated as being between USD 23.3–
24.1 billion in 2017 and USD 25.8–28.0 billion in 2018. The technical report on the fourth BA contains an overview of climate finance commitments by MDBs from their own resources that are attributable to Annex II Parties for 2013–2018.46
- Private climate finance mobilized
- Data on private finance flows to developing countries remains limited owing to uncertainty of the geographical sources and destinations of flows. As reported in the fourth BA, the OECD estimates that private climate finance mobilized by developed countries through bilateral and multilateral channels amounted to USD 14.5 billion in 2017 and USD 14.6 billion in 2018. During 2016–2018, direct investments in companies and special purpose vehicles mobilized the most private finance (33 per cent of the total), followed by guarantees (31 per cent) and loan syndications (19 per cent). Credit lines, simple co-financing arrangements and investment in funds together accounted for the remaining 20 per cent.
- The fourth BA also reports that private finance flows from developed to developing countries were USD 5.3 billion in 2017 and USD 11 billion in 2018 (CPI, 2020a). The increase in 2018 was due to a rise in renewable energy and low-carbon transport projects in the emerging markets in Latin America and the Caribbean, Central Asia and Eastern Europe, and sub-Saharan Africa.
- Information on the recipients of climate finance remains limited. The increase in BUR submissions from non-Annex I Parties has resulted in a greater amount of information on finance received. However, time lags in data availability for reporting make it difficult to provide updated or complete information on finance received in 2017–2018. Of the 63 Parties that had submitted BURs as at December 2020, 28 included some information on climate finance received in 2017 or 2018. In total, USD 7.8 billion was reported in the fourth BA as received for projects starting in 2017 and USD 2 billion for projects starting in 2018. A total of 23 developed country Parties included information on recipients of finance at either the country or project level in their BR4s.
46 See UNFCCC SCF. 2021b. Fourth (2020) Biennial Assessment and Overview of Climate Finance Flows. Technical Report. Bonn: Germany. Table 2.8, p. 76. Available at https://unfccc.int/sites/default/files/resource/54307_1%20-%20UNFCCC%20BA%202020%20-%20 Report%20-%20V4.pdf.
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- Thematic distribution of climate finance from developed to developing countries through bilateral and multilateral channels, including information on financial instruments
- The fourth BA noted that support for mitigation remains greater than support for adaptation. Adaptation finance has remained at between 20 and 25 per cent of committed concessional finance across all sources (noting measurement differences, see table 1 below). However, the continued rise in public climate finance flows contributing towards both adaptation and mitigation complicates this assessment. The rise is most obvious in flows from multilateral climate funds and through bilateral channels. Whereas the GCF allocates climate finance for projects in this cross-cutting category to adaptation or mitigation, not all institutions do so in their programming or reporting. This makes it more difficult to track progress in scaling up adaptation finance and ultimately achieving balance between finance for adaptation and mitigation objectives.
- Grants continue to be a key instrument for adaptation finance. In 2017–2018, grants accounted for 64 and 94 per cent of the face value of bilateral adaptation finance reported to OECD and of adaptation finance from multilateral climate funds, respectively (see table 1 below). During the same period, 9 per cent of adaptation finance flowing through MDBs was grant-based. These figures indicate no change since 2015–2016. Mitigation finance remains less concessional in nature, with 30 per cent of bilateral flows, 29 per cent of multilateral climate fund approvals and 3 per cent of MDB investments taking the form of grants. These figures, however, may not fully capture the added value brought by combining different types of financial instruments, or technical assistance with capital flows, which can often lead to greater innovation or more sustainable implementation.
Table 1
Characteristics of international public climate finance flows in 2017–2018
Annual | Area of support (percentage) | Financial instrument (percentage) | ||||||||
average | ||||||||||
(USD | Cross- | Concessional | ||||||||
billion) | Adaptation | Mitigation | REDD+a | cutting | Grants | loans | Other | |||
Multilateral climate fundsb | 2.7 | 20 | 48 | 5 | 27 | 53 | 40 | 8 | ||
Bilateral climate financec | 29.9 | 20 | 66 | – | 14 | 64 | 36 | <1 | ||
MDB climate financed | 39.2 | 25 | 75 | – | – | 5 | 75 | 20 |
Source: UNFCCC SCF, 2021b.
Note: All values based on approvals and commitments.
a In decision 1/CP.16, para. 70, COP 16 encouraged developing country Parties to contribute to mitigation actions in the forest sector by undertaking the following activities: reducing emissions from deforestation; reducing emissions from forest degradation; conservation of forest carbon stocks; sustainable management of forests; and enhancement of forest carbon stocks.
b Including: Adaptation for Smallholder Agriculture Programme, AF, BioCarbon Fund Initiative for Sustainable Forest Landscapes, Clean Technology Fund, Forest Carbon Partnership Facility, Forest Investment Program, GCF, GEF Trust Fund, Global Climate Change Alliance, LDCF, Partnership for Market Readiness, PPCR, SCCF, SREP and United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries.
c Bilateral climate finance data are sourced from the BRs of Annex II Parties (that also include regional and other channels) for the annual average and thematic split. The financial instrument data are taken from data from OECD DAC, referring only to concessional flows of climate-related development assistance reported by OECD DAC members. In section C of the summary and chap. III of the technical report, “bilateral finance” refers only to concessional flows of climate-related development assistance reported by OECD DAC members.
d The annual average and thematic split of MDBs only includes their own resources, whereas the financial instrument data include data from MDBs and from external resources, owing to the lack of data disaggregation.
- Geographical distribution
- With regard to the geographical distribution of public concessional climate finance, Asia remains the principal beneficiary according to the fourth BA. In 2017–2018 the region received on average 30 per cent of funding commitments from bilateral flows, multilateral climate funds and MDBs. Sub-Saharan Africa received an average of 24 per cent of commitments across the sources in the same period, followed by Latin America and the
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Caribbean with 17 per cent and the remainder going to the Middle East and North Africa; Central, Eastern and South-Eastern Europe; the South Caucasus; and Central Asia.
- The LDCs and SIDS are particularly vulnerable to the adverse effects of climate change. Article 9 of the Paris Agreement emphasizes the importance of the provision of scaled-up financial resources to these countries. In 2017–2018, funding committed to projects in the LDCs represented 22 per cent of bilateral flows and 24 per cent of finance approved through multilateral climate funds. Funding committed to SIDS represented 2 per cent of bilateral finance and 10 per cent of finance approved through multilateral climate funds. Of the finance provided to the LDCs and SIDS, the amount targeting adaptation fell slightly in 2017–2018, although the shares remained stable overall. MDBs channelled 11 per cent of their climate finance to the LDCs and 3 per cent to SIDS. As in previous years, adaptation finance as a share of total climate finance to these countries was significantly higher than that of the overall climate finance spending by MDBs.
Figure 9
Geographical distribution of public climate finance
: Geographical distribution of bilateral public climate finance
- : Geographical distribution of public climate finance from multilateral climate funds
: Geographical distribution of public climate finance from multilateral development banks
Sources: UNFCCC SCF, 2021b. Author analysis of OECD DAC creditor reporting system statistics, African Development Bank et al, 2014, 2015, 2016, 2017, 2018, 2019, Climate Funds
Update, 2020.
- Country-driven strategies, priorities and needs of developing country Parties
- As highlighted in the 2021 synthesis report on NDCs, almost all Parties provided information on finance as a means of NDC implementation, with most characterizing finance in terms of international support needed and some mentioning finance in relation to domestic implementation only. Many Parties provided quantitative estimates of financial support needs, which were often expressed as total amounts over the time frame of the NDC. Many provided updated quantitative estimates of financial support needs and some provided estimates for the first time in their new or updated NDCs. Most of those Parties also made efforts to differentiate between quantitative estimates for conditional actions reliant on international support and those for unconditional actions that may be financed from domestic sources. Some Parties provided information on financial support needs across mitigation and
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adaptation themes or sectors, and a few provided total estimates. Mitigation finance is needed across renewable energy, energy efficiency, transport and forestry, whereas adaptation finance is needed for activities related to water, agriculture, coastal protection and resilience.47
- The first NDR provides the most comprehensive overview of available information, evidence and data on needs from reports at the national, regional and global level. Needs reported at the national level are compiled from nine reports prepared by developing country Parties and submitted to the UNFCCC, namely adaptation communications, BURs, LEDS, NAPAs, NAPs, NCs, NDC, TAPs and TNAs. Information and data on the needs of developing countries are also available from regional and global reports.
- The overall costed needs by type of report are based on the information on activities with associated costs included in the corresponding individual national reports. The needs included in national reports are identified using a top-down approach (i.e. needs that are typically estimated using economy-wide or sectoral modelling techniques) or a bottom-up approach (i.e. needs that are typically identified from a project pipeline). Developing country Parties periodically update their national reports submitted to the UNFCCC, reflecting changing circumstances and improvements in their data-collection processes and analysis. Therefore, data and information on needs may not be exhaustive, as the needs are dynamically changing.
- Information and data from national reports
- Insights from quantitative data on needs
Figure 10
Overview of articulation of needs, including costed needs, by type of national report submitted to the UNFCCC
Source: UNFCCC SCF, 2021a.
Note: Ranges of costs included where available.
47 FCCC/PA/CMA/2021/8/Rev.1, paras. 194‒196.
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- Figure 10 above provides an overview of the articulation of the needs of developing country Parties (outer circles), including overall costed needs (inner circles), across the nine types of national report. The difference between the numbers in the outer and inner circles indicates the number of needs that are not costed. As at 31 May 2021, NDCs from 153 Parties included 4,274 needs, with 1,782 costed needs identified across 78 NDCs, cumulatively amounting to USD 5.8–5.9 trillion up until 2030. Of this amount, USD 502 billion is identified as needs requiring international sources of finance and USD 112 billion as sourced from domestic finance. For 89 per cent of the costed needs, information was not provided on possible sources of finance. Among the national reports, NCs from 149 Parties present the highest number (6,990) of identified needs, of which 1,137 costed needs cumulatively amount to USD 8.8–8.9 trillion, with 5 per cent of the costed needs distributed across 45 NCs and 95 per cent in 1 NC. BURs from 62 Parties indicated 2,044 needs, of which 535 needs are costed, cumulatively amounting to USD 11.5 trillion, with 5 per cent distributed across 60 BURs and 95 per cent across 2 BURs, thereby representing the highest amount of costed needs identified across the nine types of national report (see figure 10 above). These figures should be viewed in the light of the size and nature of the economies of developing country Parties and the scale of climate impacts.48
- Thematic distribution of costed needs
Table 2
Overview of sources of reported costed needs of developing countries by type of national report submitted to the UNFCCC
Costed needs (USD billion) | |||||
Report | Total | Mitigation | Adaptation | Cross-cutting | Other |
Adaptation communicatio n | 44.10 (100%) | – | 44.10 (100%) | – | – |
BUR | 11 465.53– 11 465.90 (100%) | 5 286.94– 5 287.31 (46%) | |||
3 628.81 (32%) | 2 550.01 (22%) | – | |||
LEDS | 1 707.15– 1 707.35 (100%) | 1 407.15– 1 407.34 (82%) | |||
300.00 (18%) | – | – | |||
NAP | 135.02–135.03 (100%) | 135.02 (100%) | |||
– | – | – | |||
NAPA | 10.05 (100%) | 10.05 (100%) | |||
– | – | – | |||
NC | 8 845.85–8 934.94 (100%) | 5 019.30– 5 033.83 (56–57%) | 3 812.06– 3 882.07 (43%) | ||
2.23 (>0%) | 12.25–16.81 (>0%) | ||||
NDC | 5 817.48– 5 888.56 (100%) | 2 156.05– 2 156.13 (37%) | |||
764.24–835.24 (13–14%) | 2 893.39 (49–50%) | 3.81 (>0%) | |||
TAP | 40.74 (100%) | 21.97 (54%) | 18.76 (46%) | 0.01 (>0%) | |
– | |||||
TNA | 88.24–92.33 (100%) | 30.33–34.33 (34–37%) | 57.9–57.98 (63–68%) | 0.01 (>0%) | |
– |
Notes: (1) Ranges of costs included where available. (2) The percentages given are the percentages of the type of costed need for each report type.
- Cumulatively, identified costed mitigation needs tend to be larger than costed adaptation needs across the reports that cover all thematic areas such as BURs, NCs and NDCs (see table 2 above). The overall amount of costed adaptation needs is comparable with the overall amount of costed mitigation needs expressed in NCs (43 and 56–57 per cent, respectively). Although some developing countries provided information on costed needs for mitigation and adaptation by sector and subsector, this information was not provided across
48 The information provided here is derived from the fourth BA and the first NDR. See UNFCCC SCF. 2021b and UNFCCC SCF. 2021a.
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all reports. Therefore, it was not possible to provide a comprehensive and accurate overall amount of costed needs by sector and subsector in the first NDR.
- Although developing country Parties identified more adaptation than mitigation needs, larger costs were identified for the latter. This may not imply that mitigation needs are greater, but rather be due to a lack of available data, tools and capacity for assessing adaptation needs.
- Regional distribution of costed needs
Table 3
Number and cost of needs expressed in nationally determined contributions by region
Region | Number of expressed needs | Number of expressed needs with financial information (i.e. costed needs) | Costed needs based on available financial information (USD billion) |
African States | 1 529 | 874 | 2 459.56–2 460.56 |
Asia-Pacific States | 1 677 | 630 | 3 180.39–3 250.39 |
Eastern European States | 282 | 112 | 9.36 |
Latin American and Caribbean States | 771 | 166 | 168.18–168.26 |
Western European and other States | 15 | – | – |
Note: Ranges of costs included where available.
- Available information related to costed needs varies across regions (see table 3 above).
- Some Parties reported information on potential needs related to averting, minimizing and addressing loss and damage, either through specific adaptation activities that include objectives related to averting, minimizing and addressing loss and damage; referred to damage incurred owing to recent climate-related events such as droughts and severe weather; or modelled potential future impacts of climate on GDP or economic losses in a given year (e.g. 2030 or 2050). The information was also reported in the context of national circumstances, climate impacts and/or needs, depending on the reporting Party.
- Needs expressed in national reports are dynamically changing and may depend on different factors, such as temperature scenarios, mitigation pathways and adaptive capacity, extreme weather events, adverse effects of trade and economic barriers, and social factors such as poverty. Therefore, data and information thereon may not be exhaustive. While the number of needs and costed needs communicated in national reports is lower for some regions than others, this does not mean that those regions have no or fewer needs. Rather, this may be due to a lack of available data, tools and capacity for determining and costing needs. Therefore, the number of needs and costed needs compiled from national reports available at the time of preparation of the first NDR should not be used to draw comparisons of the actual needs across regions.
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- Insights from qualitative data on needs
Figure 11
Needs expressed by developing countries in national reports by theme, region and means of implementation
: By theme
- : By region
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- : By means of implementation
Figure 12
Needs expressed by developing countries in national reports by sector
- : Mitigation needs by sector
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- : Adaptation needs by sector
- Thematic distribution
- Overall, needs related to adaptation are mentioned more often than those related to mitigation in all report types except BURs and LEDS, indicating greater attention to supporting the expressed adaptation needs of developing countries (figure 11.1 above).
- Regional distribution
- Figure 11.2 above presents the regional distribution of identified needs by report as a percentage. When the number of expressed needs across the nine national report types is considered, developing country Parties in the Africa and Asia-Pacific regions identified comparable numbers of needs across the national reports with broad thematic and sectoral coverage such as BURs, NCs and NDCs, comparable with the Latin America and Caribbean region only in the case of BURs. Developing country Parties in the Asia-Pacific region used NAPs and TAPs to further specify adaptation needs, as more than half of the needs identified in NAPs and TAPs were from this region. Developing country Parties in the Latin America and Caribbean, and Eastern European regions expressed more needs in their NCs than in other national reports.
- The needs of the LDCs were expressed in more detail in certain reporting types than in others. For example, the NDCs included more information relating to mitigation (52 per cent). The LDCs provided limited information in BURs and NCs; 13 per cent of expressed needs in BURs came from the LDCs, whereas in NCs, 34 per cent of expressed needs came from the LDCs, of which 13 per cent included financial information.
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- SIDS expressed their needs mainly in NCs, NDCs, NAPs and TNAs. Half the expressed needs with financial information in NAPs were from SIDS. However, the monetary value of these needs was about 1 per cent of the total monetary value of requested needs. In NDCs and BURs, the needs expressed by SIDS for mitigation and adaptation were fairly equal but in NCs needs for adaptation were almost double the needs for mitigation.
- Distribution by means of implementation
- Qualitative data show a significant prevalence of capacity-building and technology development and transfer needs, which may in part be due to the resources developing countries can access to support the identification of these needs. The number of capacity- building needs was higher than finance needs and technology development and transfer needs identified in the nine national report types except for TNAs (see figure 11.3 above).
- Sectoral and subsectoral distribution
- On the basis of the number of mitigation needs expressed across the nine national report types, energy is the lead sector for climate change mitigation actions, followed by land use and forestry, transport, agriculture, and waste and sanitation (see figure 12.1 above).
- Most needs in the energy sector related to requests for support for the energy efficiency and renewable energy subsectors, albeit with some variation between them. In NDCs, needs for renewable energy development were identified almost twice as frequently as those for energy efficiency (399 and 261, respectively) but the total nominal value of energy efficiency projects was 1.5 times larger than that of renewable energy projects (USD 377.22 billion and USD 198.08 billion, respectively). In BURs and NCs, more needs related to renewable energy than to energy efficiency were identified. TNAs included a larger variation of needs among energy subsectors, including the development of natural gas, the phasing-out of inefficient subsidies, the exploration of carbon capture and storage, and the development of the efficient use of coal.
- The majority of expressed mitigation needs in the land-use and forestry sector represented a few densely forested countries. Data in NCs and NDCs showed that, within this sector, needs related to reforestation are the largest needs expressed in financial terms.
- On the basis of the number of adaptation-related needs expressed across the nine national report types, agriculture and water are the two lead sectors for climate change adaptation actions, followed by disaster prevention and preparedness, coastal zone management and health (see figure 12.2 above).
- Adaptation needs in the agriculture sector covered a wide variety of land uses that overlap with other key sectors. Needs related to agroforestry and irrigation, for example, also touch on areas or land managed under the forestry and water sectors. Needs related to the agriculture sector relate to crop diversification, development of resistant crops, land and soil management, livestock management, and fisheries and aquaculture.
- Adaptation needs in the water sector are dominated by the need for water distribution infrastructure, water harvesting and irrigation. In NDCs, about 38 per cent of expressed needs in the water sector included financial information. Water distribution infrastructure, including wastewater treatment, was the largest need in financial terms across all types of report.
- Other areas of needs
- Developing country Parties also communicated other areas of needs that involved issues such as gender, indigenous peoples and vulnerable groups. However, across the nine national report types, less than 10 per cent of required activities referred to gender or specific communities. Where these topics are included in national reports, information tends to relate to commitments, policies and/or strategies.
- Some reports that expressed needs for policy development were linked to the SDGs and the Addis Ababa Action Agenda. In general, the implementation of climate actions is mainstreamed in SDG-related actions. However, a few reports expressed needs focusing on
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institution-building and policy development, aiming to link climate commitments with the SDGs.
- Information and data from reports by regional and global actors
- The first NDR also presents available information and data on the needs of developing countries from regional and global reports. For the mitigation needs of developing countries, these reports use a mix of energy–economy and integrated assessment models for scenarios of below 2 °C, ranging from USD 2.4 to 4.7 trillion in annual energy-related investment needs globally (Collum et al, 2018); investment opportunities based on stated national plans and targets including and beyond NDCs, ranging from USD 23.8 to 29.4 trillion for emerging markets from 2016 to 2030 (IFC, 2020); and investment estimates for achieving conditional NDC targets using carbon prices, for example USD 715 billion in Africa (AfDB, 2021) (see figure 13 below for an example of energy investment needs identified by the International Renewable Energy Agency).49
Figure 13
Shares of annual average clean energy investments in the International Renewable Energy Agency transforming energy scenario, by region, 2016–2050
Source: International Renewable Energy Agency, 2019. Transforming the energy system – and holding the line on rising global temperatures. Abu Dhabi: International Renewable Energy Agency. Available at www.irena.org/publications/2019/Sep/Transforming-the-energy-system.
Notes: (1) SE Asia=South East Asia, MENA=Middle East and North Africa, LAC=Latin America and the Caribbean, EU=European Union; (2) A list of the country classification used in this report is contained in Annex A of UNFCCC SCF, 2021a.
- Reports based on energy–economy models note that developing country regions have the largest investment gaps compared with historical trends to achieving climate scenarios in line with the Paris Agreement. Three- to fourfold increases of investment are necessary in both renewable energy and energy efficiency across many regions that include developing countries.50
- Regional and global reports also provide estimates related to adaptation and resilience. Costs based on bottom-up national and sector-based studies (ranging from USD 140 to 300 billion annually by 2030) measuring impacts to GDP (for example, ranging from USD 289.2 to 440.5 billion up to 2030 in Africa) and the incremental investment needed to upgrade or
49 For the purpose of the first NDR, various data sources were used to illustrate needs of developing country Parties, without prejudice to the meaning of this term in the context of the Convention and the Paris Agreement, including but not limited to Parties not included in Annex I to the Convention and other classifications used in regional and global reports.
50 See IEA. 2019. World Energy Investment 2019. International Energy Agency. Available at https://iea.blob.core.windows.net/assets/c299fa1e-f2f4-4b81-bfb2-672d3a50ccab/WEI2019.pdf.
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retrofit infrastructure stock (ranging from USD 11 billion 670 billion in annual incremental costs) are most prevalent.
- To make current and future infrastructure climate-resilient, annual costs as a percentage of GDP are at least double in countries with emerging market economies, low- income countries and small States compared with the costs in high-income countries, that is 1.1–1.49 per cent compared with 0.45 per cent. Investment needs expressed as a percentage of GDP for upgrading new infrastructure and coastal protection are proportionally greater in lower-income countries and small States, while retrofitting existing infrastructure is the major cost component in countries with emerging market economies. However, the reports also noted that specific knowledge on the degree of exposure of infrastructure to natural hazards, related to their location, intensity and level of risk, could affect the incremental cost of making infrastructure climate-resilient (e.g. 3 per cent of total investment as opposed to 8–45 per cent) (see figure 14 below).51
Figure 14
Public investment needs for resilience of physical infrastructure, by country grouping (gross domestic product weighted average)
Source: International Monetary Fund. 2020. Fiscal Monitor. Policies for the Recovery. Washington, D.C.: International Monetary Fund.
Note: (1) AE=advanced economies, EMEs=emerging market economies, LIC=low-income countries, SSCs=small-state counties; $=USD, bn=billion; (2) A list of the country classification used in this report is contained in Annex A of UNFCCC, 2021f.
- The information and data generated from the national, regional and global reports cannot be compared with each other, as the reports have different time frames, objectives and scopes. However, all the reports may be viewed as complementary in offering different insights, granularity and processes and approaches for identifying needs.
- Challenges and barriers derived from the fourth biennial assessment and overview of climate finance flows and the first Report on the determination of the needs of developing country Parties related to implementing the Convention and the Paris Agreement
- This section provides an overview of information on challenges and barriers as derived from the fourth BA and the first NDR.
- Ownership of the end use of climate finance flows remains a critical factor in its effectiveness. The broad concept of ownership encompasses the consistency of climate finance with national priorities, the degree to which national systems are used for both spending and tracking, and the engagement of a wide range of stakeholders. Financial needs are being increasingly articulated, but to date lack sufficient comparability of methods, including for costs, time frames and assumptions, in order to make an accurate assessment of the alignment of climate finance provision with such needs. Ministries of finance and planning are strengthening their commitments to engage in climate change planning, with national-level institutions playing a greater role through domestic tracking, monitoring and verification of climate finance.
- Globally, increasing engagement with climate change can be observed in the ministries responsible for strategic investment and financial management decisions at the
51 As footnote 51 above.
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national level (e.g. ministries of finance, treasuries and ministries of national planning). Engagement in climate finance by a government often manifests itself in the articulation of climate change in the national development agenda and the development of climate change policies, legislative frameworks and strategies, which are evolving rapidly: there are already over 1,860 climate change-relevant laws worldwide.52
- The multilateral climate funds continue to encourage country ownership in their programming. Funds may require a letter of no objection from designated national authorities and some also support broader climate planning policy and processes. The LDCF, for example, has long supported NAPAs and now supports NAPs, which are longer term and are even more integrated into national planning processes, with enhanced potential for national ownership of adaptation actions. The multilateral climate funds are also accrediting more diverse entities: for example, in 2019 the GCF accredited JS Bank Limited, a private sector entity with headquarters in Pakistan, providing microfinance, project finance and commercial banking nationally, and Finance and Business Financial Services Limited in Chile, which promotes financial and commercial advisory services. MDBs and bilateral contributors often also have country partnerships and strategy documents, updated periodically, in order to facilitate country ownership.
- In 2017–2018, there continued to be a push to diversify modalities of access to climate finance. In a 2019 survey of 105 respondents from 45 developing countries, 73 per cent identified finance from multilateral climate funds as the most challenging source of finance to access compared with private finance (62 per cent), MDBs and development finance institutions (30 per cent) and bilateral sources (17 per cent). Institutions in developing countries are increasingly able to meet fiduciary and environmental and social safeguard requirements for accessing funds. Data show a continued increase in the number of national implementing entities of multilateral climate funds, as well as an increase in the accreditation of civil society and private entities, with both trends largely driven by the GCF. Significant shares of climate finance approvals from multilateral climate funds are programmed through international multilateral accredited and implementing entities (see figure 16 below).
Figure 15
Implementing entities of major multilateral climate funds by scale, 1992–2020
Source: Based on a review of the reports of the relevant multilateral climate change funds, including: AF, Clean Technology Fund, Forest Investment Program, GCF, GEF, LDCF, PPCR, SCCF and SREP.
Note: UN=United Nations, CIFs=Climate Investment Funds, CSO=Civil Society Organisations.
52 Climate Change Laws of the World database, Grantham Research Institute on Climate Change and the Environment,London School of Economics and Political Science, and Sabin Center for Climate Change Law, Columbia Law School. Available at www.climate-laws.org.
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Figure 16
Percentage of climate finance approved from key multilateral climate funds by implementing entity type, 2011–2018
Source: Based on a review of the reports of the relevant multilateral climate change funds, including AF, Clean Technology Fund, Forest Investment Program, GCF, GEF, LDCF, PPCR, SCCF and SREP and SCCF.
- The capacity of institutions to make strategic choices to use climate finance has long been recognized as important. Both the AF and the GCF have developed readiness programmes, supporting countries in planning for, accessing and delivering climate finance. Together, these funds have approved over USD 285 million in readiness support. The GEF has instead incorporated capacity-building objectives into existing project funding through enabling activities. Reviews of these programmes have endorsed the use of readiness support to build all aspects of the capacity required to mobilize finance for climate action, rather than focusing on supporting access to multilateral climate funds.
- The below highlights challenges identified by developing country Parties in their national reports to the UNFCCC as described in the first NDR. In general, challenges related to capacity-building needs were frequently identified by developing countries, varying widely from institutional-level capacity to availability of local expertise. Regarding institutional-level capacity, the need to improve intersectoral and intrasectoral coordination for needs identification was highlighted as a significant challenge by the majority of developing countries. The coordination challenge spans from the local to the national level. One of the cited drivers for this was the lack of specialized institutions within line ministries to spearhead climate change actions.
- Most countries did not provide financial quantification of their needs, in particular their adaptation needs. This suggests that estimating the cost of climate action is, for most countries, challenging, in particular in identifying and implementing methods to estimate costs. This challenge was partially attributed to the absence of accurate, complete and sufficient data and information to determine needs comprehensively. This challenge cut across all countries at various levels.
- Another challenge was the low financing capacity of the public sector, owing to limited resources and several competing needs, therefore limiting the availability of funds to finance an elaborate needs assessment and prioritization exercise.
- Limited technical capacity for collecting, processing, interpreting and reporting data, in particular in building future scenarios for emission reduction commitments, was also a significant challenge identified for the needs determination process. Tracking progress towards meeting the objective of the Convention and the purpose and goals of the Paris Agreement was another technical capacity challenge, limiting the ability of countries to identify gaps and needs that would enable or fast-track the achievement of the targets set.
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- Limited institutional capacity for coordinating climate actions, including the needs identification process, across both the public and private sectors, was also identified as a significant challenge. This challenge is compounded by the numerous sectors and institutions that spearhead climate-relevant actions in both the private and public sectors within the complex framework of differentiated governance structures and levels.
- Level of indebtedness can be a major barrier to a country in meeting its climate action ambition. This situation has become worse owing to the COVID-19 pandemic, which has placed more demand on the limited resources available in developing countries. Most developing countries have a considerable debt burden, which when combined surpassed USD 8 trillion at the end of 2019. This level of indebtedness is expected to significantly reduce the speed at which some climate actions can be implemented by developing countries.
- Furthermore, financing arrangements to avert, minimize and address loss and damage, in particular in those developing countries that are most vulnerable to the impacts of climate change, while not commonly understood as a stand-alone area of support, have increasingly become a focus for discussions under the Paris Agreement. In 2016, Parties tasked the secretariat with the preparation of a technical paper elaborating the sources of and modalities for accessing financial support for addressing loss and damage.53 Parties also requested the secretariat, under the guidance of the WIM Executive Committee and the Chair of the SBI, to organize an expert dialogue to explore a wide range of information, inputs and views on ways to facilitate the mobilization and securing of expertise, and enhancement of support, including finance, technology and capacity-building, for averting, minimizing and addressing loss and damage associated with the adverse effects of climate change, including extreme weather events and slow onset events, (the Suva expert dialogue) with a view to informing the preparation of a technical paper.54 The 2016 SCF Forum further explored financial instruments that address the risks of loss and damage associated with the adverse effects of climate change. The Forum discussed four broad financial instruments and tools: (a) risk transfer schemes; (b) catastrophe and resilience bonds; (c) social protection schemes; and (d) contingency finance. It concluded that, although there was a range of approaches for addressing the risks of loss and damage, more work was needed to develop suitable financial instruments.55 It noted that the types of knowledge, action, support and approaches to address loss or damage, as identified under the WIM to date, vary considerably and are wide in scope. In part, this is because responses cover several domains, including disaster risk management, risk transfer and pooling, contingency and humanitarian measures, adaptation to climate change and climate-resilient development.56
- Support for responding to weather and climate extremes is different in nature to that for slow onset events.57 Extreme weather events often require rapid pay-outs and can lead to more costly capital, for example, as the frequency and severity of such events increase. Slow onset events, in contrast, point instead to financial protection for the most vulnerable or human displacement. With challenging demarcation and with no commonly agreed definition for loss and damage, significant challenges exist in collecting and aggregating information on finance flows relevant for averting, minimizing and addressing loss and damage.
- It has emerged that the development and use of financial instruments to avert, minimize and address loss and damage requires greater information and knowledge on climate-related risk and assets at risk, as well as an adequate policy and regulatory environment (Pandit Chhetri et al., 2021). As echoed in the highlights of the 2016 SCF Forum, a holistic and integrated approach is needed, but no one size will fit all, both in the measures taken but especially in the set of financial instruments used to address the risk of
53 Decision 4/CP.22, para. 2f.
54 More information available at: https://unfccc.int/topics/adaptation-and-resilience/workstreams/loss- and-damage-ld/workshops-meetings/suva-expert-dialogue#eq-2.
55 See FCCC/TP/2019/1, available at https://unfccc.int/sites/default/files/resource/01_0.pdf
56 See the web page of the 2016 SCF Forum at https://unfccc.int/event/2016-forum-standing-committee- finance.
57 Slow onset events, as identified in decision 1/CP.16, para. 25, include sea level rise, increasing temperatures, ocean acidification, glacial retreat and related impacts, salinization, land and forest degradation, loss of biodiversity and desertification.
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loss and damage and the financial and regulatory infrastructure that these instruments will sit within.
- CMA 3 decided to establish the Glasgow Dialogue between Parties, relevant organizations and stakeholders to discuss the arrangements for the funding of activities to avert, minimize and address loss and damage associated with the adverse impacts of climate change, to take place in the first sessional period of each year of the SBI, concluding at its sixtieth session (June 2024). CMA 3 also requested the SBI to organize the Glasgow Dialogue in cooperation with the WIM Executive Committee,58 which will provide a synthesis report to the technical assessment component of the global stocktake in line with paragraph 36 of decision 19/CMA.1.59
- Information contained in the biennial communications received in accordance with Article 9, paragraph 5, of the Paris Agreement
- Recognizing the importance of predictability and clarity of information on financial support for the implementation of the Paris Agreement, CMA 1 requested developed country Parties to submit, starting in 2020, the biennial communications referred to in Article 9, paragraph 5, of the Paris Agreement, including the information specified in the annex to decision 12/CMA.1. It encouraged other Parties providing resources to communicate such information biennially on a voluntary basis. CMA 1 also requested the secretariat to prepare, starting in 2021, compilations and syntheses of the information included in the biennial communications which will inform the global stocktakes.60 This section provides an overview of the main issues as outlined in the compilation and synthesis of the first biennial communications.
- In their first communications, developed country Parties acknowledged that financial support must be scaled up to meet the Paris Agreement goals. They reiterated their commitment to the goal of mobilizing jointly USD 100 billion per year by 2020 in the context of meaningful mitigation actions and transparency on implementation and referred to progress in that regard.
- Projected levels of public climate finance to be provided to developing countries beyond 2020 were presented, based on the multi-year finance commitments and plans to allocate and disburse financial resources through bilateral and multilateral channels. Many Parties highlighted the increasing trend in their annual climate finance flows over the past years and their commitment to scale up, or at least maintain at a specific annual level, their provision of climate finance in the future.
- Future levels of climate finance were projected on the basis of several assumptions, including that committed multi-year public climate finance will be approved annually for disbursement by national parliament, and that disbursement may be affected by socioeconomic challenges faced by developing countries and/or changing needs and priorities of recipient countries, for example as a result of the COVID-19 pandemic.
- Information related to experience, challenges and lessons learned for informing future efforts in mobilizing and delivering climate finance includes coordination of stakeholders, both providers and recipients, to avoid overlaps and gaps in mobilization and delivery; enabling environments for strengthening the absorptive capacity of developing countries; and tracking and measuring the effectiveness of climate finance to strengthen its impact.
- Many Parties outlined the support provided to developing countries for integrating climate change considerations, including climate resilience, into their international development assistance.
- Many Parties emphasized that the Paris Agreement goals cannot be met unless finance flows are consistent with a low-emission and climate-resilient development pathway, and
58 Decision 1/CMA.3, paras. 73–74.
59 See https://unfccc.int/event/WIMExcom-inputs-GST.
60 Decision 12/CMA.1. The compilation and synthesis of the submissions provided in 2021 is contained in FCCC/PA/CMA/2021/3. Available at https://unfccc.int/documents/278119. The Biennial Communications received are available at: https://unfccc.int/Art.9.5-biennial-communications.
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underscored the importance of finance ministries, central banks and financial regulators in this regard. Accordingly, many Parties were taking action at the national level and supporting international cooperation on integrating climate change considerations into the economies and financial systems of developing countries. Through COVID-19 recovery packages, countries should be assisted in “building back better” towards a low-emission and climate- resilient future.
- Many of the communications include the actions and plans of Parties for mobilizing private climate finance and refer to the crucial role of public intervention in unlocking finance at the scale required for achieving the Paris Agreement goals and meeting the climate investment needs of developing countries.
- Parties provided information on programmes and initiatives for supporting developing countries in formulating and implementing climate action, identifying climate technology innovation, unlocking private climate finance, and capacity-building as key areas for support. Parties specified the elements that they consider key to ensuring the effectiveness and sustainability of the capacity-building activities they support.
- Information related to policies associated with climate finance support is generally focused on strengthening recipient country ownership of climate action and ensuring the effectiveness of climate finance. Priorities for support relate to the LDCs and SIDS, sectors and target groups, commonly women, youth, indigenous peoples, vulnerable local communities, and micro, small and medium-sized enterprises in developing countries.
- Parties reported on their efforts and varying progress in striking a balance between their support for mitigation and for adaptation. Grant-based adaptation finance for the LDCs and SIDS was highlighted in many communications, while others presented plans to scale up private finance for adaptation. Many Parties underlined their commitment to provide adaptation finance through the UNFCCC climate funds (AF, GCF, LDCF and SCCF).
- Information on efforts to ensure that the climate finance provided addresses the needs and priorities of developing countries effectively was included by many Parties in their communications. They emphasized that (a) their climate finance is driven by developing country Parties’ demands, which can enhance its effectiveness, sustainability and scalability;
(b) for maximum impact, support, particularly for adaptation, must align with the national development plans of the recipient countries; and (c) capacity-building is crucial for helping developing countries to enhance their adaptation plans and formulate investment-ready climate project proposals.
- CMA 3 underscored the importance of the information contained in the first biennial communications and identified in the compilation and synthesis, including in relation to:
- Making finance flows consistent with a pathway towards low-emission and climate-resilient development in accordance with Article 2, paragraph 1(c), of the Paris Agreement;
- Developing actions and plans for mobilizing private climate finance;
- Effectively addressing the needs and priorities of developing countries, including striking a balance between support for mitigation and adaptation;
- Integrating climate change considerations, including climate resilience, into international development assistance;
- Improving enabling environments to strengthen the absorptive capacity of developing countries;
- Reflecting on lessons learned for informing future efforts in providing, mobilizing and delivering climate finance.61
- CMA 3 recognized that developed country Parties submitted information related to Article 9, paragraphs 1 and 3, of the Paris Agreement for the first time in 2020 and that improvements based on lessons learned should be considered when preparing biennial communications in 2022, taking into account the areas for improvement identified in the
61 Decision 14/CMA.3, para. 7.
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summary report and in accordance with the annex to decision 12/CMA.1, particularly in relation to:
- The indicative projections of climate finance for developing countries and specific plans for scaling up the provision and mobilization of climate finance;
- The information on the shares of projected climate finance for adaptation and mitigation, and on plans for addressing the balance between the two;
- Enhancing the quality and granularity of information on programmes, including projected levels, channels and instruments, particularly on climate finance for the LDCs and SIDS, and on relevant methodologies and assumptions.62